An analysis of the Bangladesh's National Budget for FY2015

MEDIA BRIEFING
AN ANALYSIS OFTHE
NATIONAL BUDGET FOR FY2015
06 JUNE 2014

CPD IRBD 2014TEAM
2CPD (2014): An Analysis of the National Budget for FY2015
Dr Debapriya Bhattacharya, Distinguished Fellow CPD and, Professor Mustafizur Rahman,
Executive Director, CPD were in overall charge of preparing this report as the Team Leaders.
Lead contributions were provided by Dr Fahmida Khatun, Research Director; Dr Khondaker
Golam Moazzem,Additional Research Director and MrTowfiqul Islam Khan, Research Fellow,
CPD.
Valuable research support was received from Mr M Shafiqul Islam,Additional Director,
Administration & Finance; Ms Khaleda Akhter, Senior Research Associate; Mr Muhammad Al
Amin, Senior Research Associate; Mr Kishore Kumer Basak, Senior Research Associate; Mr Md.
Zafar Sadique, Senior Research Associate; Ms Mehruna Islam Chowdhury, Senior Research
Associate; Mr Uttam Kumar Paul, Deputy Director,Accounts; Mr Mashfique Ibne Akbar, Research
Associate; Ms Farzana Sehrin, Research Associate; Ms Saifa Raz, Research Associate; Ms Umme
Salma, Research Associate; Ms Umme Shefa Rezbana, Research Associate; Ms Mahenaw Ummul
Wara, Research Associate; Mr Muhammad Nabil, Dialogue Associate; Mr Md. Naimul Gani Saif,
Research Associate; Mr Mohammad Afshar Ali, Research Associate; Ms Shahida Pervin, Research
Associate; Ms Afnan Ashfaque, Research Associate; Mr Mostafa Amir Sabbih,Research Associate;
Ms Kashfi Rayan, Research Associate; Ms Shahzeen Hafiz, Programme Associate; Mr Ziad Quader,
Research Intern; Ms Nadee Naboneeta Imran, Research Intern and Mr Ali Ishraq Khabir, Research
Intern, CPD.
MrTowfiqul Islam Khan was the Coordinator of the CPD IRBD 2014Team.

ACKNOWLEDGEMENT
The CPD IRBD 2014Team would like to register its sincere gratitude to Professor
Rehman Sobhan, Chairman, CPD for his advice and guidance
The Team gratefully acknowledges the valuable support provided by Ms Anisatul Fatema
Yousuf, Director, Dialogue and Communication Division, CPD and her colleagues at the
Division in preparing this report. Contribution of the CPD Administration and Finance
Division is also highly appreciated. Assistance of Mr A H M Ashrafuzzaman, Deputy
Director (System Analyst) and Mr Hamidul Hoque Mondal, Senior Administrative Associate
is particularly appreciated
Concerned officials belonging to a number of institutions have extended valuable support
to the CPD IRBD 2014 Team members for which the Team would like to register its
sincere thanks
The CPD IRBD 2014 Team alone remains responsible for the analyses, interpretations and
conclusions presented in this report
CPD (2014): An Analysis of the National Budget for FY2015 3

CONTENTS
I. INTRODUCTION
II. MEDIUMTERM OUTLOOK
III. PUBLIC FINANCE FRAMEWORK
IV. FISCAL MEASURES
V. SECTORAL MEASURES
a. AGRICULTURE
b. INDUSTRY
c. CAPITAL MARKET
d. ENERGY AND POWER
e. ENVIRONMENT
f. DEFENSE
VI. SOCIAL SECTOR
a. EDUCATION
b. HEALTH
c. GENDER
d. CHILD
e. SOCIAL SAFETY NET PROGRAMMES
VII. LOCAL GOVERNMENTAND DISTRICT BUDGET
VIII. ECONOMIC REFORMS
IX. CONCLUDING REMARKS

1. INTROUCTION
 The national budget is an important policy document –
 Means of addressing the political commitments
 Medium for making policy pronouncements
 Way to address prevailing and emerging economic challenges
 The budget has been prepared in the backdrop of –
 Enhanced public investment
 Stable inflation
 Substantial surplus in BoP
 Stable exchange rate
 Augmented foreign exchange reserve
 Stable (falling) global commodity prices
 At the same time -
 Slowdown in GDP growth
 Declining private investment
 Significant shortfall in revenue mobilisation
 Reliance on domestic sources for financing fiscal deficit
 Depressed domestic demand

1. INTROUCTION
 The objectives of the budget for FY15 appear to be:
 Attaining fiscal consolidation backed up by high growth of revenue
 Revitalising economic growth momentum
 Reverting the downturn of private investment
 Further control of inflation
 It also seems that the Budget for FY15:
 Has finally abandoned the Sixth FiveYear Plan targets
 The Seventh FiveYear Plan has not been picked up
 Has little reference to new and specific commitments of the recent election
manifesto

1. INTROUCTION
 CPD’s analyses on the budget have been undertaken in view of –
 Trends in macroeconomic correlates and outlook including the
consistency between fiscal framework and macro targeting
 Soundness of fiscal framework
 Sectoral priorities
 Sensitivity to social groups (e.g. gender, child, poor)
 Regional dimensions (local government)
 Emphasises the importance of economic reform agenda
 Concludes with a set of summary observations

1. INTROUCTION
 Bangladesh has improved its performance in OBI over the years
 However, within South Asia Bangladesh’s performance is average
Bangladesh’s score in Open Budget Index (OBI) OBI Score in South Asia (2012)
Source: Open Budget Index

1I. MEDIUM TERM OUTLOOK
 The new estimates of GDP (base year 2005-06) is not used by the Finance Minister – although the
Economic Review (published by the Finance Ministry) used the new estimates
 The same document also provides the medium term macroeconomic framework based on 1995-96
base year
 Will the GDP growth target be compared with the new or old base year?
 If GDP growth in FY15 has to be 7.3%, private investment (as % of GDP) has to grow from 21% to
25% (4-5% percentage points or around Tk. 75,000 crore additional amount of private investment
or USD 9.5 billion) in a single year – an impossible target.
 Considering continuing improvement in public investment and trend capital productivity
 Indeed dual approach is creating confusion!
GDP Growth (%), base year:2005-06 Private Investment as % of GDP, base year:2005-06

 GDP growth for FY15 is possibly a desirable target, which regrettably does not have any
substantive basis
 The Finance Minister is expecting favorable weather and political stability!
 Public investment (as % of GDP) is expected a rise by 1.2 percentage points in FY15
 However, the projection shows that in FY15 private investment as a share of GDP
will continue to decline (for third consecutive year), but will ensure higher growth of
GDP!
GDP Growth (%), base year:1995-96 Private Investment as % of GDP, base year:1995-96

Local Investment Registration (CroreTk.) JointVenture Investment Registration (CroreTk.)
Growth of Private Sector Credit (%) Import of Capital Machineries (million $)

 Private sector credit growth for FY14 is reported to be 16.5% (11.5% as of March
2014)
 Inflation rate to come down to FY14 at 7.0% (7.5% in April 2014)
 Target for FY15 is set at 6.0%
 Export is expected to increase by 15% in FY15
 Import on the other hand is anticipated to grow by 15% in FY15
 10% growth of remittances inflow is envisaged for FY15 ((-) 3.6% growth during Jul-
May FY14)
 Foreign exchange reserve at the end of FY14 will be $16.9 bln (20.4 bln on 3 June’14)
 2.6 months of imports!
 Should be 5 months of imports - is it a computational error?!

 It can also be seen that the medium term outlook proposed by the government has
predicated a very optimistic scenario - e.g. 8% GDP growth in FY17
 GDP growth will accelerate, while inflation will systematically slide
 Similarly, the budget deficit will reduce (as % of GDP), while the financing will be
more from foreign sources
 Basis of such optimistic medium term outlook is quite obscure.
 Poor projection of macroeconomic correlates
 Weak quality of fiscal planning
 Little consistency between fiscal framework and macro targeting

 Revenue (16.8%) projected to grow faster than public expenditure (15.9%)-
 Total budget expenditure is set at 18.7% of GDP
 Revenue income will be 13.7% of GDP
 Development expenditure (32.5%) programmed to grow faster than non-
development revenue expenditure (14.3%)
 ADP: 32.1% of total public expenditure (27.7% in the RBFY14)
 Budget deficit has been projected at 5.0% of GDP (same in RBFY14)
 Balance in financing budget deficit will be restored, if implemented –
 High foreign financing target (30.7% growth over the RBFY14) has been
set with anticipated gross foreign aid flow of USD 4.1 billion
 Government’s net bank borrowing will increase by only 4.1%
 The fiscal framework may once again be found to be vulnerable in the
face of reality!

FY Revenue
NBR (1) Non-NBR (2) Tax Revenue (3=1+2) Non-Tax Revenue (4) Total Revenue (5=3+4)
FY2012 -0.30 -7.20 -0.58 -13.95 -3.13
FY2013 -7.95 -9.73 -8.02 -6.48 -7.77
FY2014 -8.15 0.96 -7.82 0.96 -6.44
Avg. FY12-FY14 5.47 5.47 5.96 7.13 5.78
Expenditure
ADP (1) Non-ADP (2) Total Expenditure (3=1+2)
FY12 -18.41 -2.27 -6.81
FY13 -10.81 -8.47 -9.14
FY14 -8.91 -0.25 -2.82
Avg FY12-FY14 12.71 3.66 6.26
Deficit Financing
Foreign
Grants
(1)
Foreign
Loan
(2)
Amortization
(3)
Foreign
Borrowing Net
(4=2+3)
Bank-
Borrowing
(5)
Non-Bank
Borrowing (6)
Domestic
Borrowing
(7=5+6)
Total Financing
(8=1+4+7)
FY2012 -27.29 -49.09 4.64 -72.24 43.44 -59.17 12.32 -16.43
FY2013 6.33 -34.84 -10.07 -50.36 16.75 -50.94 4.45 -14.25
FY2014 -10.70 -11.28 -9.50 -12.43 15.35 38.00 20.66 8.20
Avg FY12-FY14
14.77 31.74 8.07 45.01 12.48 25.18 49.37 12.96
Exploring Credibility of Fiscal Framework
Differences between Actual and Proposed Figures of FiscalVariables (%)

 Applying Chi-square test on fiscal variables of FY2001-FY2014, it is found that all
the actual figures of fiscal variables significantly deviates from proposed figures
 In FY2014, actual total financing was 8.2 per cent larger than proposed total
financing. It was due to high actual non-bank borrowing and actual domestic
borrowing in FY2014
 The most volatile component of fiscal framework is total financing of which
most volatile is domestic borrowing
 The second most volatile component of fiscal framework is total expenditure of
which most volatile is ADP
 The third most volatile component of fiscal framework is total revenue of which
most volatile is non-tax revenue
 Quality of planning in the area of fiscal framework in Bangladesh
remain wanting

0.0 5.0 10.0 15.0 20.0 25.0
Total expenditure
Total revenue expenditure
Total Development expenditure
Average (FY2005-06 to FY2012-13) expenditure difference between allocation and expenditure
in real terms (base 2005-06)
 Deviation of total expenditure from allocation is 11.8 per cent over FY06 to FY13
 Deviation of development expenditure from allocated figures stands at 22.6 per cent
 This raises questions regarding the planning and implementation of public expenditure

Revenue Mobilisation
 FY15 budget targets an additionalTk. 26,283 crore
revenue with a 16.8% growth over RBFY14
 NBR to take the lead role (accounting for 94.1% of
incremental revenue) with 19.3% growth
 44.6% of incremental revenue from income tax; while
34.8% fromVAT
 Import duty collection growth target is set at 8.6%
Share of Revenue FY15
Incremental Share of Revenue FY15

Revenue Mobilisation
 Non-NBR revenue growth for FY15 remain at a subdued level
 In absence of any lump receipts (e.g. telecom license fee) the target looks to be
on the high side
 Targets for non-NBR tax and non-tax were raised in RBFY14 over the unattainable
targets for BFY14
 Overall revenue collection may fall short of Tk. 12,000-13,000 crore from the target
of RBFY14 (around Tk. 23,000 crore from the budget target)
 Under such a scenario required growth rate for revenue in FY15 may shoot up to
around 27%, while for NBR the actual target may stand around 25%
 Only in FY08 (27.4% - CTG effect) and FY11 (28.0% - international price effect) a
higher growth was attained – two outlier years!

Total Public Expenditure
Sector
Share in
BFY15
Share in
RBFY14 Change in FY15B over FY14R
% CroreTk %
Public Service 15.3 12.4 11349.0 42.2
Education andTechnology 13.1 13.1 4497.0 15.9
Interest 12.4 12.3 4503.0 17.0
Transport and Communication 9.8 7.2 8940.0 57.7
Agriculture 7.6 8.2 1390.0 7.9
LGRD 7.1 7.1 2326.0 15.1
Defence Services 6.6 7.0 1282.0 8.4
Social Security andWelfare 6.1 5.7 2882.0 23.4
Others(Memorandum Item) 5.3 8.9 -5839.0 -30.4
Public Order and Safety 5.0 5.6 530.0 4.4
Fuel and Energy 4.6 4.6 1638.0 16.5
Health 4.4 4.6 1191.0 12.0
Industrial and Economic Services 1.1 1.7 -765.0 -21.0
Housing 0.8 0.8 321.0 18.5
Recreation, Culture and Religious Affairs 0.8 0.9 39.0 2.0
Total Public Expenditure 100.0 100.0 34284.0 15.9

 Allocation for Public Services is set to be 1.4 times of RBFY14 (Tk. 11,349 crore)
 Tk. 10,269 crore additional allocation for Finance Division! – 90.5% of the incremental allocation
for Public Services
 AdditionalTk. 6,466 crore allocation for Investments in Shares and Equities – 57.0% of the
incremental allocation to Public Services
 Tk. 5,000 crore has been for Investment for Recapitalisation
 Highest incremental share to Subsidies and Current Transfers, followed by interest payments and
block allocation – block allocation is to increase by a substantial margin!
 Interest payment remains the sector with third highest allocation
 Domestic Interest Payments will increase by 17.9% in FY15– about 34.7% of total incremental
augmented non-development revenue expenditure
Indicators
Growth
FY15/RBFY14
Share B
FY15
Share RB
FY14
Incremental Share
FY15B
Change
FY15/RBFY14
Pay and Allowances 4.4 21.2 22.5 9.4 1202
Goods and Services 0.3 12.1 13.3 0.4 46
Interest Payments 17.0 23.0 21.7 35.1 4503
Domestic 17.9 21.7 20.3 34.7 4451
Foreign 3.1 1.3 1.4 0.4 52
Subsidies and Current Transfers 11.2 37.1 36.9 39.5 5057
Block Allocation 312.5 1.4 0.4 11.1 1428
Acquisition of Assets and Works 9.0 5.2 5.3 4.5 579
Non-Development Revenue Expenditure 10.5 100.0 100.0 100.0 12815
EconomicAnalysis of Non-Development Revenue Expenditure

Subsidy
 No clear mention of the total demand proposed for FY2015
 Total subsidy allocation is reduced by (-) 18.2%
 Total subsidy in BFY14 is 2.0% of GDP which was 2.7% in RBFY14
 Kept within the IMF-ECF indicated limit
 BPC subsidy is expected to be (-) 61.9% lower
 Higher tariff values are proposed for import of petroleum! Will increase subsidy
demand
 Will it require another price adjustment?!
 PDB subsidy for power is expected to be14.8% higher
 These are reflected in loans and advances ((-) 39.9% reduction)
 Allocation for net loans and advances is kept below the IMF-ECF limit
 Agriculture subsidy will beTk. 9,000 crore – same as the previous year
 For export sector, allocation is increased by 10%

Annual Development Programme (ADP)
 ADP ofTk. 80,315 crore (6.0% of GDP) has been proposed for FY15
 33.9% higher than RADP for FY14 and 21.9% higher than ADP for FY14
 It will be 41% higher if there is a 5% shortfall in RADP for FY14 implementation
 Project Aid component will be 34.5% of total ADP (35.3% in RADP of FY13 and
37.3% % in original ADP of FY13)
 Tk. 3,060.6 crore has been provided to development assistance programmes
 Tk. 3,006 crore has been allocated to unapproved block allocation
 Self-financed development budget is reported for the second time
 Allocation for autonomous bodies and corporations has been reduced to Tk. 5,686
crore (Tk. 8,114 crore for FY14)
 Only 1,744 crore has been implemented upto April 2014

 The ADP for FY15 contains 1,034 projects (1046 for ADP of FY14)
 Another 684 unapproved projects has also been listed in the ADP FY15
 Similar trend in the structure of ADP continues
 Only 29 new projects are included: 0.6% of total ADP;
 202 new projects were included in the RADP for FY14; 157 new projects were included
in the RADP for FY13
Number of Projects
1037
Number of Projects
1046
Number of Projects
1034

 More than half of the allocations (about 51.0%) are provided to 352 projects
which are suppose to continue to the next ADP (for FY16)
 However, highest number of projects (357 projects) are to be concluded in
FY15, according to project completion timeline
 296 carryover projects consist of 11.4% of the total allocation
 Transportation sector has 87 of these projects, while ‘Physical Planning, Water Supply
& Housing’ Sector also has 53 number of similar projects
 Planning Commission identified some 305 of these projects to be completed
in FY14
 However, 110 projects (36.1%) have been carried forward to this list from ‘expected
to be completed’ list for ADP FY14
 It has become a tendency in recent years to list a set of unapproved projects,
similar to ADP
Project Status FY09 FY10 FY11 FY12 FY13 FY14 FY15
Unapproved projects without Allocation 407 492 800 702 720 662 624
Projects listed to seek Foreign Funds 160 227 292 259 327 346 338
Total Number of Projects in the ADP 904 886 916 1039 1037 1046 1034

 Top 5 sectors have received 66.5% of total allocation
 Transport Sector once again received both highest number of projects and
amount of allocation (23.4% of total allocation): 82.9% growth over RADP FY14
 Impact of Padma Bridge once again!
Sector
No of
Projects
ADP FY15
Share
(%) ADP
FY14
Share
(%)
RADP
FY14
Share
(%)
ADP
FY15
Growth (%) ADP
FY15
Top Five Sectors 581 68.7 64.5 66.5 37.9
Transport 189 23.3 17.2 23.4 82.9
Education & Religious Affairs 112 13.3 13.3 12.2 22.9
Power 53 13.7 13.4 11.6 15.0
Physical Planning, Water Supply
&Housing 131 8.3 9.0 10.0 49.2
Rural Development & Institutions 96 10.1 11.6 9.3 6.7
Other 12 Sectors 453 28.3 31.9 29.7 24.5
Development Assistance NA 2.9 3.5 3.8 44.2
Total 1034 100.0 100.0 100.0 33.9
Top Five Sectors in ADP FY15

 Total allocation for PMBP for FY15 is Tk. 8,100 crore i.e. 39.5% of the total cost
 Accounts for 29.8% of incremental allocation of ADP FY15 over RADP FY14
 Only 10.7% of the project cost has been implemented upto March 2014
 The project cost was estimated in 2009 – needs revisit!
 Foreign exchange reserves will definitely suffer erosion if there is no notable external
financing associated with the project
 One of the priority projects ‘Dhaka-Chittagong 4-lane project (revised)’ is expected
to be completed by December 2014
 If RADP FY14 allocation for the aforesaid project is assumed to be fully utilised, share
of implementation over its project cost would be 50.8%
 The project received only Tk. 500 crore in ADP for FY15 (which is 15.7% of project
cost) and the project is ‘not’ included ‘to be completed’ reported by the Planning
Commission
 One can question as regards possibility of completion of the project in due time –
adequate allocation has also not been received
 Many of the projects to be complemented were carried forward to the next ADP due to
inadequate allocation (i.e.Ashugonj 450MW, Siddhirgonj 335 MW Projects etc.)

 It appears that number of new projects in ADP FY15 was limited - however,
the practice of “symbolic allocation” (the minimum to keep the project in
the ADP list) is still pervasive
 13 projects under ADP received onlyTk. 1 lakh for FY15
 10 of those are investment projects
 9 of those are carryover from ADP FY14
 7 of the 13 projects are from Transport sector
 26 ‘investment' projects under ADP received only Tk. 1 crore or less (besides
those 10 investment projects with 1 lakh allocation) for FY14
 16 of the projects are carryover
 As a whole these 26 projects received only Tk. 10.2 crore allocation in ADP
FY15 (averaged Tk. 39.3 lakh per project)
 Projects from 11 different sectors shared this allocation

 The business as usual as regards ADP continues -
 Large number of projects with stagnating capacity
 Challenges of concluding and carry-over projects
 Preponderance of unfunded projects
 No attempt to bring discipline in the ADP
 No prioritisation framework
 No result-based monitoring

Budget Deficit and Financing
Description
BFY15 RBFY14 Growth
Crore Tk % of GDP Crore Tk % of GDP
FY15 over
RB FY14
Revenue Collection 182,954 13.7 156,671 13.3 16.8
Total Expenditure 250,506 18.7 216,222 18.3 15.9
ADP 80,315 6.0 60,000 5.1 33.9
Non-ADP 170,191 12.7 156,222 13.2 8.9
Overall Deficit (Excl Grants): 67,552 5.0 59,551 5.0 13.4
Financing
Foreign Grants 6,206 0.5 5,956 0.5 4.2
Foreign Loan-Net 18,069 1.3 12,613 1.1 43.3
Foreign Loan 26,519 2.0 21,058 1.8 25.9
Amortization 8,450 0.6 8,445 0.7 0.1
Domestic Borrowing 43,277 3.2 40,982 3.5 5.6
Bank Borrowing (Net) 31,221 2.3 29,982 2.5 4.1
Non-Bank Borrowing (Net) 12,056 0.9 11,000 0.9 9.6
Net Aid Requirement 24,275 1.8 18,569 1.6 30.7
Net Aid Requirement (USD) 3.1 1.8 2.4 1.6 30.7
Gross Aid Requirement 32,725 2.4 27,014 2.3 21.1
Gross Aid Requirement (USD) 4.1 2.4 3.4 2.3 21.1
 71.3% of incremental deficit will be financed by foreign sources

 Share of domestic financing 64.1% (68.8% in RBFY14)
 Tk 31,221 crore (46.2%) will come from the bank borrowing (50.3% in
RBFY14)
 Tk 12,056 crore (17.8%) will come from non-bank sources (18.5.0% in RB of FY14)
 Share of foreign financing will be
35.9% in FY15 (31.2% in RB of
FY14)
 Gross foreign aid requirement
will be around USD 4.1 bln
(USD 3.4 bln in RBFY14) – an
almost impossible target in view
of only USD 2.4 billion being
received during Jul-Apr FY14.
Sources of Deficit Financing

IV. FISCAL MEASURES
Personal IncomeTax
 Personal income tax threshold has remained the same at Tk. 2,20,000
 Needs to be revised upwards toTk. 2,50,000 considering the current
inflation rate (7.48% in April, 2014)
 Taxable threshold in Bangladesh is lower than in India, which is
IRs. 2,00,000 (equivalent toTk. 2,56,000)
 Threshold for women and senior citizens has been revised upwards toTk.
2,75,000 fromTk. 2,50,000
 For Physically challenged: the threshold has been increased toTk. 3 lakh50
thousand fromTk. 3,00,000
 New threshold has been added for and war-wounded freedom fighters at
Tk. 4,00,000
 Welcome moves to lessen the pressure on marginal taxpayers

IV. FISCAL MEASURES
Personal IncomeTax
 The fourth slab have been changed in FY15 (from 3 lakh to 5 lakh) and a new fifth
slab of 30 lakh has been added
 A new marginal tax rate of 30% has been imposed for income higher thanTk.
44,20,000, i.e. to be applicable on persons with a monthly salary of about
Tk. 3,70,000
 Laudable move towards progressive taxation and higher resource mobilisation
IncomeThreshold (Yearly) Tax Rate Taxable Income (Monthly)
On first Tk. 2,20,000 of taxable income nil 1 to 18,333
On nextTk. 3,00,000 of taxable income 10% 18,334 to 43,333
On nextTk. 4,00,000 of taxable income 15% 43,334 to 76,667
On nextTk.5,00,000 of taxable income 20% 76,668 to 118,333
On nextTk.30,00,000 of taxable income 25% 118,334 to 368,333
Balance of Income aboveTK 44.20 lakh 30% 368,334 and above
Proposed Individual Tax Rates

IV. FISCAL MEASURES
Wealth Surcharge
 In FY15, rates of wealth surcharges have been thoroughly revised
 20% surcharge will be imposed on individuals with wealth between Tk. 20 crore
toTk 30 crore and 30% surcharge on assets aboveTk 30 crore
 Positive move to increase revenue and to improve distributive justice
CorporateTax
 Tax for Non-PubliclyTraded Companies has been decreased from 37.5% to 35%
 Gap with publicly traded companies has been narrowed down
 MinimumTurnoverTax has been reduced to 0.50% from 0.30%
 This will support SMEs
 Other corporate taxes ( publicly traded companies, Banks, Insurance, mobile phones)
remain unchanged

IV. FISCAL MEASURES
Tax at Source
 Rate of tax at source on the deed value of land has been increased
from 3% to 4% in areas other than the important commercial and posh
areas within the jurisdiction of RAJUK and CDA.
 Besides, tax at source has been imposed at 3%, 2% and 1% on
registration value in other City Corporations and municipalities at
district headquarters, other municipalities, and other areas outside
municipalities respectively.
 Good move to earn additional revenues

IV. FISCAL MEASURES
Undisclosed Income
 Scope of voluntary disclosure of income by paying tax at normal rate plus
an additional 10% penalty remains unchanged
 Scope to invest in government treasury bond paying only 10% tax remain
unchanged
 Opportunity to whiten black money by investing in residential building
and apartments
 This is financially and morally unacceptable
 Moreover, this provision is an unjust scheme that creates a culture of tax
evasion.This is also discrimination against honest tax payers. Contradicts other
measures of taxation
 The Finance Minister opted to remain silent about it in his budget speech

IV. FISCAL MEASURES
Import Duty
 Significant reduction in import duties has taken place
 Supplementary Duty (SD) on 770 items has been changed – loss ofTk. 500 crores!
 To help local industries, several Customs Duties (CD) have been reduced on raw
materials used in paper, glass, rubber, furniture and plastic industries
 Import duty on raw materials used in textile sector has also been reduced to 10%
from 5 % and from 5% to 3%
 It appears that for some items reduction in SD was paralleled by rise in CDs to
give protection to domestic industries
 Tariff value of crude petroleum has been increased by $ 8/barrel (tariff value of
other refined petroleum products also increased by 9 cents/litre).This has both tax
implications and subsequently subsidy implications

Import Duty
 2 more slabs have been added with the existing 10 slabs of SD (15% & 200%)
 Raw materials of Pre-Fabricated Building and fire safety equipment have been
fully exempted from import duties
 This should help RMG owners to relocate their factories and to help address
compliance issues in RMG industry
SD on MotorVehicles
 SD on 2 types of cars have been reduced: from150% to 100% for 1751-2000cc
cars and from 250% to 200% for 2001-2750cc cars: Will help the rich!
 60% SD has been imposed on import of new hybrid cars
 SD on Microbuses and Double Cabin Pickups has been increased too
IV. FISCAL MEASURES

IV. FISCAL MEASURES
Export Duty
 10% new export duty has been imposed on Rice bran
 Will reduce the pressure on imported edible oil (import duty on edible
oil has been raised)
Tax at Source
 Reduction in tax at source (from 0.8% to 0.3%) for garments exports:
A major incentive
 For all other export sectors tax at source has been reduced from
0.8% to 0.6%
 In the backdrop of the difficulties faced by the jute sector (drastic
reduction in export), the sector should receive no less support relative to
RMG

IV. FISCAL MEASURES
VAT
 The forthcoming VAT Law 2012 (to be implemented from June, 2015)
broadly aims to undertake the following:
 Substantial improvements in VAT administration and staff
arrangements
 Decentralisation of field offices
 Extensive improvements in information technology
 Specialisation of tax employees to cater to a range of specialized
functions for the taxpayers
 Assignment of tax officials
 Establishment of Processing centre, Data centre and Contact centre
 A number of key initiatives remain incomplete
 The VAT strategic plan aims to achieve a VAT-GDP ratio of 4.6 percentage
points (which currently stands at 3.9% in RBFY2014)

IV. FISCAL MEASURES
 Bangladesh’s VAT rate
coincides with the standard
VAT rate of 15 to 20 per
cent
 Bangladesh fares very poorly as
compared to other low income
countries in terms of VAT-GDP
ratio
 In 2011 Bangladesh lagged
behind 15 out of the 16 low-
income countries considered
in the analysis; if target of
4.6% is achieved, Bangladesh
will be behind 11 of the 16
countries
0 1 2 3 4 5 6 7 8 9
Malawi
Benin
Zambia
Mali
Uganda
Average high income countries
Average upper middle income countries
Average lower middle income countries
Tanzania
Burkina Faso
Madagascar
Ethipoia
Rwanda
Average low income
Niger
Nepal
Pakistan
Guinea
Togo
Bangladesh
Chad
VAT revenue (as percentage of GDP)
Source: IMF (2011)

IV. FISCAL MEASURES
 FY2015 budget proposals which ought to be appreciated:
 Launch of online registration from 01/01/2015 and online filing of return by end
June, 2015
 Should be implemented at the earliest to ensure widening of the tax base
 Setting a cap for maximum penalty of VAT evasion
 1% ‘Health Development Surcharge’ and tax incidence hike for cigarettes
 Will the new money be spent on health Sector?
 Tax exemption of services related to the export-oriented industries
 Will benefit exporters and overall export
 Existing 23 sectors under the VAT regime will be charged the ‘standard’ VAT rate
of 15%
 Removal of the truncated base value system in line with the newVAT Law

IV. FISCAL MEASURES
 VAT enhancement in English medium schools, jewellery items and land
development and building construction sectors
 Luxury items have been targeted – needs to be appreciated
Welcome fiscal measures:
 VAT reduction on edible oils to stabilize consumer prices
 Reduction of supplementary duty on filament bulbs
 Exemption of kidney dialysis procedures fromVAT
 Fixed tax on replacement sim
 Hopefully, this would act as a measure to curtail disputes with the mobile companies

IV. FISCAL MEASURES
Tax Holiday
 Existing tax holiday facilities have been extended till June 2019 (Accelerated
Depreciation has been reinstated for new industries)
 Tax holiday period extended from 7 years to 10 years for the existing industries in
LDAs and the new ones ( 2014 to 2019)
 Proper implementation must be ensured to prohibit misuse of the facility
 5 years tax exemption for Demutualised Stock Exchange
 This may not encourage investment until other factors (political stability,
infrastructure, power etc.) for investment are there
Tax Rebate for Industries in LDAs
 10% till 30 June, 2019 for the existing ones and 20% for the new or relocated ones
 Will be helpful to reduce geographical imbalance in industrialisation

IV. FISCAL MEASURES
Tax administration
 Strengthening NBR needs to be addressed at the earliest given the uphill task in the
form of augmenting challenging revenue targets for FY2015
 FY2015 budget mentions that around 9000 new positions have been created to
strengthen functioning of NBR
 Some of the initiatives including simplification of income tax return, e-payment
system, e-TDS system and e-filing, tax administration retrieval system,
implementation of the ASYCUDA system have already taken place
 Several initiatives are yet to be realized
 Implementation of New Income Tax law (draft prepared); Direct Tax
modernization program not fully enforced; Business Identification number (BIN)
program not implemented; Bills as regards amendments of Acts on Tax, VAT,
Customs, Civil Procedure Codes for accommodating ADR are progressing at
slow pace
 Expediting the modernisation plan through adequate financial and human resources
will be crucial in the above regard

a.AGRICULTURE
 Allocation for agricultural & allied sectors (AAS) is decreasing
Figure: Share of AAS in Total Budget Figure: Share of AAS in Total GDP
 Average share of AAS in total budget was 10.8% during FY10-FY14, but reduced
to 7.6% in FY15
 Average share of AAS in total GDP was 1.64% during FY10-FY14, but reduced
to 1.43% in FY15
 Allocation for the Ministry of Water Resources increased by 30.6%. This is
mainly due to rise in development budget by 40%.

a.AGRICULTURE
 Agricultural subsidy remains constant at Tk. 9,000 crore
 It was 4.2 % of total budget in FY14 which with decline to 3.6% in FY15.
 CPD estimates that if current administered prices of fertilizer in local market
remain same and international prices prevail at the average prices of last 12
months, GoB will need Tk. 4,679 crore (52% of total Ag. Subsidy) to underwrite
the projected fertilizer demand of 43.7 lac MT in FY15.
 It could adversely affect the subsidy allocation for other agri-inputs subsidies such as
seeds and irrigation
 To ensure fair prices of agricultural commodities, an Agricultural Price
Commission needs to be set up on an urgent basis to ensure incentive
price for the producers wile maintaining market stability
 Introduction of Authoritative Land Records would help to reduce land
litigation. Use of PPP to implement the project would also be a good move.

a.AGRICULTURE
 Food adulteration is a huge problem in Bangladesh. The Pure Food Act,
2013 has been enacted but its implementation has not started yet.
 Pure Food Authority needs to be established urgently
 Formulation of the National Shrimp Policy 2014 would help Shrimp
farming.
 Zero duty on poultry & livestock feed item Sorghum, Millet, Guar
meal, & Zeolite
 will reduce the prices of poultry feed, and
 is expected to help the poultry farmers who have suffered during the
political turmoil last year
 Providing identity card to fishermen is a good initiative. If there will be any
government support for them in future, it will targeting

b. INDUSTRY
 Enhancing private investment within short to medium term requires a set of well-
targeted and well-designed fiscal and budgetary measures
 Need to address the supply side and demand side challenges
 A set of fiscal and budgetary measures has been announced in the national budget
FY15 which partly addresses those challenges
 Fiscal measures (direct impact on investment, production, export and sales)
 Supply side issues: by reducing operational cost ; by enhancing revenue income
 Demand side issues: by enhancing households’ income and by reducing price of
consumer products
 Public investment (medium to long term impact on private investment)
 Supply side issues: by enhancing investment in physical infrastructure (e.g.
transport, power and energy) and social infrastructure (human resource
development)
 Demand side issues: by creating new jobs through increase in public investment

b. INDUSTRY
 A number of measures, however, constrain attaining the targets
 Adverse impact on domestic industries due to reduction of CD/SD on imported
finished products: reduction of tax incidence: from -3% to -56%
 Insufficient allocation for key infrastructure ADP projects
 Adverse impact on consumers for possible rise in retail price of consumer goods
and services due to enactment of newVAT act along with withdrawal ofVAT
exemption and reducedVAT
 Curiously, proposed budget allocation for the Industrial sector in FY15 is lower than
that that of RADP14 (less than 21% and share of total public expenditure to fall by
0.6% point)
 Reduced allocation for a number of ministries such as Industries, Labour and
Employment but increased allocation for Jute & Textiles, Commerce, Expatriate
Welfare and Overseas Employment: Deprive private sector in getting early benefit
 ADP allocation (Tk.1830 cr.): 32.9% less than RADP14; however, inclusion of self
financed projects (Tk.348 crore) has decelerated the extent of negative growth
(-20%)CPD (2014): An Analysis of the National Budget for FY2015 57

b. INDUSTRY
 43 projects related to industry sector are currently under implementation: a total
of 24 projects are supposed to be completed by FY15 as per project timeline
 ADP15 claimed that 16 projects are likely to be completed in FY15: of these, 9
projects will near completion level if full budget allocation is made in FY15:
Positively contribute to investment in the private sector
 A number of those projects remain far behind the targeted timeline: Shahjalal
fertiliser (87%), API Park (70%), BSCIC industrial estates in Sirajgonj (38%), and
Borguna (54.9%), Comilla industrial estate (1.7%), strengthening of BSTI (88%),
establishment of four textile vocational institute (18%); BMRE of existing cloth
processing centre at Narshingdi (17%): overrun of time and cost is likely to reduce
the expected return from these projects

b. INDUSTRY
Small and Medium Enterprises (SMEs): Subsidised credit and refinancing facilities for the
SMEs will continue: Likely to promote private investment
 Reduction of CDs on various raw materials (from 10-25% to 5-10%) will benefit a
number of industries including glass, ceramics, rubber, paper, furniture, paint, electrical,
plastic and baby diaper: positively contribute to investment, production and sales
 Reduction of SD on intermediate input by 5%: positive for local firms producing filament
bulb
 Exemption on billet manufacturing raw materials (sponge iron reduced iron) and rise
in import duty of billet and ingot: will provide advantage to local industries against
imported products
 Reduction ofVAT by 5% for local mobile phone assembling industry: Positive
 Rise ofVAT on imported mobile phones (10%  15%): Positive for local industries
 Rise in CD (25% from existing 5%) on LPG cylinders: will give advantage to local industry
 25% CD on energy saving bulbs and electric fan motors; reduction of CD on raw
materials for diaper production: Positive
 Introduction of1% ‘Green Tax’ : Positive market based approach; Limited impact to
reduce pollution; strong enforcement of environmental rules and regulations is required

b. INDUSTRY
 Leather: Proposed reduction of SD on selected inputs of leather and footwear (e.g.
prepared water pigments; polishes, creams: from 20% to15%): Likely to reduce
production cost
 Announcement of stimulus package for leather along with four other export-
oriented sectors may contribute positively: package yet to be detailed out
 Slow progress in implementation of relocation of the Tannery Industrial Estate
(10.2% till March 2014 and 51.2% by FY15) raise doubt about full implementation
within the revised deadline: Relocation is planned to be started in March, 2015
 Jute: Given the weak state of export and poor competitiveness, the tax deduction at
source from 0.8% to 0.6% would not be adequate to compensate their losses: it may
be further reduced at least at the level of those of the RMG sector (to 0.3%)
 Enactment of the Mandatory Packaging Act, 2010 is urgently needed in order to
expand the domestic market for jute sacks and other jute products (CPD, 2014)
 Timely completion of project related to HYV jute and seed production (51.2% by
FY15) with a view to pass the benefits to the private sector.

b. INDUSTRY
 RMG andTextile: Reduction of tax at source from 0.8% to 0.3% (till June, 2015)
along with other financial support have given relief to entrepreneurs and help
undertaking necessary retrofitting measures to make the factories compliant:
Enforcement of minimum wage should be contingent
 Withdrawal of duties on raw materials necessary for manufacturing of
prefabricated buildings and full exemption on fire resistant door, emergency light,
and sprinkler system: Positively contribute to improve fire safety in the workplace
 Reduction of CD on flex fiber (from 10% to 5%) and artificial staple fibre (from 5% to
3%) would likely to reduce production cost of specific textiles in b/l textile industries
 Reduction of SD on imported fabric (e.g. woven fabrics, woven pile fabric, knitted
fabrics, track suit, undergarments) would likely to reduce cost of import: may
benefit the consumers
 Ship building: Announcement of stimulus package for ship building along with four
other export-oriented sectors may positively contribute: the package is not detailed out
 Fixing import duty at 5% on navigation light, broadcasting equipment and fire
extinguishers: (existing: 15%/kg): reduce the production cost
 Science &Technology, ICT:Total allocation increased by 83% over RADP14.
 ADP allocation registered a significant rise: 108% growth over RADP14; 11
projects are suppose to be completed in FY15: 71-100% to be implemented
CPD (2014): An Analysis of the National Budget for FY2015
61

b. INDUSTRY
 Pharmaceuticals: Reduction of SD on 40 basic raw materials of pharmaceuticals industry
from 15-25% to 5% would reduce cost of raw materials: Positively contribute to the industry
 Reduction of CD on 40 raw materials for alopaethic medicine: positively contribute to
local industry
 Special Economic Zones: Four SEZs will be set up under Bangladesh Economic Zones
Development Fund at a cost of Tk.81.95 crore with 97% financial support from IDA,
WB’s soft-lending facility: Should be set up immediately
 Tourism: Published a special booklet on tourism (2014-20 plan; long term plan: 2014-25)
 Short term projects: 59; medium term: 49 and long term: 19 (total 127):A separate
ministry for tourism sector
 Significant reduction of total allocation (-43% over RADP14) mainly due to reduction
of development expenditure (-55% over RADP14) particularly in project on
upgradation of Shahjalal International Airport
 Enhanced allocation for construction of motels and refurbishment of hotel in Cox’s
bazar: quick implementation is needed
 PPP initiative for developing exclusive tourist zones: still at project development stage
 Seven unapproved allocated projects for tourism development: Need ADP allocation
 ‘Special Tourism Fund’ for development can be set up (e.g. Malaysia)

Labour
 Significant reduction of allocation for the Ministry of Labour (-23.4% over
RADP14) mainly due to reduction of development expenditure (-47%)
 This has been partly covered with significant allocation under self-financed projects
under labour related projects of different ministries (Tk.413.6 crore)
 Slow progress in skill development project (under Ministry of Education and
Religion: 32% by June, 2105 supposed to be completed by June 2014)
 Poor progress in establishment of hostel for female garment workers at Ashulia,
Savar & Dhaka (2% by FY2015; completion period: June, 2017).
 Unapproved and unallocated project on establishment of 9 modern fire service
& civil defense station in areas with concentration of garment industries: Need
allocation and quick implementation
 Few welfare centres for workers (50):allocation required for setting up more
health centres in industrial zones
b. Industry

c. CAPITAL MARKET
 Capital market has remained stable during FY14: DSEX index has increased by
11.7%; total trade value by 9.4% and market capitalisation by 16.3%
 11 companies have offloaded IPOs during FY14 – mostly manufacturing
companies: concerns regarding poor base of some these companies: weak
oversight during the approval stage
 Proposal for tax exemption facilities for demutualised stock exchanges for over 5
years in graduated rate would help to build confidence on the bourses to potential
international institutional strategic partners
 Remaining works of demutualisation (e.g. finding out strategic partners) should
be completed on time.
 Retail investors will get some relief because of rise in tax exempted dividend
income from Tk.10,000 from Tk.15,000

 Total allocation for fuel and energy sector has been increased by16.5% in FY15 over
RADP14); but sectoral allocation in terms of total allocation will remain same (4.6%)
 Development expenditure has increased consistently (in constant term) since FY2010 (Figure)
 Power: Allocation for power sector has increased by 16.7% (over RADP) mainly due to rise
in development expenditure
 Out of 13 projects listed as ‘projects to be completed by FY15’ only 1 project is likely
to be completed while 3 projects will be completed above 50 % and rest 9 projects
below 50%
 Increased subsidy allocation for BPDB in FY15 (Tk.7000: 14.8% higher than last year):
perhaps to compensate higher cost burden for procurement of petroleum at higher price
after the adjustment of tariff value (from US$32/barrel to US$40)
d. ENERGY AND POWER
0
50
100
150
200
0
1000
2000
3000
4000
5000
6000
7000
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Development Expenditure Revenue Expenditure
Revenue and Development Expenditure in Fuel and Energy Sector (in constant term)

d. ENERGY AND POWER
 Energy & mineral: Allocation will be increased by16% but reduced in share of total
expenditure (-0.25% point)
 Development expenditure: Reduction in allocation in investment programme, technical
assistance and JDCF (-3%, -68% and -73% respectively) will be outweighed by
increased allocation for self finance projects (24.8%)
 Number of projects has doubled (58 vis-à-vis 29 in RADP 14); highest allocation
under self-financed projects (34 projects)
 Four unapproved projects (170% higher than ADP 14): Maheshkhali-Anowara gas
transmission line need to be included in ADP with adequate allocation
 3 projects related to gas transmission and distribution are likely to be completed by
June, FY15: improve supply of gas at consumers’ end (industry would be benefitted)
 Mixed progress in 28 projects to be completed by June, 2015 (Table)
 7 projects-max. 50% & 19 projects –max 75% to be disbursed by June, 2015
 Projects which cost over Tk.100 crore and are supposed to completed by June, 2015
will not be completed on time: 4 projects-less than 20% & 10 projects –max 100% by
June, 2015

d. ENERGY AND POWER
 As per the budget speech of the FM, establishment of an LNG terminal (at
Maheshkhali Island) still in consideration: No immediate hope
 Increase in tariff value for crude petroleum as well as for other refined petroleum
products along with drastic reduction of subsidy for BPC (from Tk.7350 crore to
Tk.2800) would require significant upward adjustment of tariff at retail level: likely to
increase cost of fuel in production and increased households’ expenditure- adverse impact
 Rooppur nuclear power plant (1st Phase) is a fast track project: 50% of the project
cost has been allocated for FY15 (completion due in FY17)
Project Cost
No of
Projects
No of projects
suppose to be
completed by
June, FY15
Share of possible
disbursement by June FY15 for
the projects suppose to be
completed by June, FY15
Less than tk 10 crore 2 1 55%
Between tk.10-50 crore 7 7 47-94%
Between tk 50-100 crore 5 5 89-99%
More than tk.100 crore 14 12 0.8-99%
Total 28 25
Status of implementation of all projects which are supposed to be completed in FY15 (except self financed)

e. ENVIRONMENT
 FY15 budget has proposed to introduce 1% ‘Environment Protection Surcharge’ or
‘Green Tax’ on ad-valorem basis on all kinds of products manufactured in Bangladesh
by industries which pollute the environment.
 This is a a very good initiative to discourage pollution.
 There will be significant challenge in estimating and realizing this tax
 Identification of polluting industries will also be a challenging task
 In order to implement this measure, capacity of the department of environment needs to
be strengthened
 In order to protect the environment & control pollution of rivers, GoB is planning to
introduce Eco-Tax
 a very good initiative; would help reduce pollution
 Similarly, tax holiday-facilities for pollution-free Hybrid Hoffman Kiln (HHK) brickfields
would help reducing air pollution
 Conversion of wastes into compost fertilizer with wastes collected from all city
corporations and municipalities in an eco-friendly waste management system will be
useful to improve the environment.
 Guidelines are yet to be formulated to utilize Bangladesh Climate Change Resilience Fund

f. DEFENSE
 Explicit allocation for Defense
services is 6.6% of total
expenditure (7.0% in RBFY14)
 One may expect this allocation
to increase at the end of the
year as per past trend
Defense Budget (Tk. Crore)
Defense Budget as % ofTotal Budget Defense Budget as % of GDP

a. EDUCATION
 Allocations for the Ministry of Education (MoE) & the Ministry of Primary
and Mass Education (MoPME) have increased by 16.4%.
 However, the allocations for these two ministries as percentage of total
budget is 11.7% which are lower than the average allocation of 14.1%
during FY10-FY14.
 Allocation for the MoE & MoPME is 2.2% of GDP which is slightly higher
than the average share during FY10-FY14 (of 2.1% of GDP) – Not
increasing!
Figure: Share of MoE & MoPME inTotal Budget
 In FY10 allocation for MoE & MPME
was 16.3% which has declined
to 11.7% in FY15

a. EDUCATION
 Allocation for revenue expenditure on Education (in real term) is falling during
FY11.
 Development expenditure had been much lower than the allocation since FY11
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Education Development Expenditure in
real terms (base 2005-06)
Dev Exp Allocation Dev Exp Expenditure
0
2000
4000
6000
8000
10000
12000
Education Revenue Expenditure in real
terms (base 2005-06)
Revenue Exp Allocation
Revenue Exp Expenditure

b. HEALTH
 Allocation for the Ministry of Health and Family Welfare (MoHFW) in FY15 has
been increased by 17.7%.
 However, the allocation as percentage of total budget is 4.5% which is lower
than the average allocation of 5.7% during FY10-FY14.
 Allocation for the MoHFW is 0.83% of GDP in FY15 which is lower than the
average share of 0.86% of GDP during FY10-FY14 – Stagnating!
Figure: Share of MoHFW in Total Budget
 In FY10 allocation for the MoHFW
was 6.6% of total budget which dropped
down to 4.5% in FY15
 Introduction of Social Health
Insurance Programme is a timely
initiative.
 Use of revenue received from the 1% ‘Health Development Surcharge’ on all
imported and domestically produced tobacco products for the treatment and
rehabilitation of tobacco disease-stricken people has to be ensured

b. HEALTH
 Revenue budget allocation and use are declining in real terms
0
500
1000
1500
2000
2500
3000
3500
4000
Health Revenue Expenditure in real
Revenue Exp Allocation
Revenue Exp Expenditure
0
500
1000
1500
2000
2500
3000
Health Development Expenditure in real
Dev Exp Allocation Dev Exp Expenditure

c. GENDER
 Forty ministries prepared gender budget report for FY 2015
 Allocation increased in 31, unchanged in1 and decreased in 8 ministries
 Allocation for gender budget in FY 2015 is Tk. 66,739 crore which is 4.98 % of GDP and 27.64% of total
budget
 However, when the allocation for gender budget under 40 ministries is added, the amount stands at Tk.
58510 crore.The reason for the anomaly in allocation for women is not clear.
 This year`s allocation is 11.68% higher than FY 2014
 Tax free income for women has been raised fromTk. 2.5 lacs in FY 2014 toTk. 2.75 lacs in FY 2015
 Special allocation ofTk. 100 crore is allocated for development of women
 An amount of Tk. 100 crore was allocated in the budget for FY 2014. However, how much has been
utilized is not known
 Women from rural areas should be provided training on small business in order to access resources
from this fund.
Year Total (Tk.Cr.) %of Budget %of GDP Gender Budget for No. of Ministry
FY13 (R) 54,304 28.68 5.23 25
FY14 (R) 59,756 27.64 5.06 40
FY15(P) 66,739 26.64 4.98 40
Table:Allocation for gender budget

c. GENDER
Ministries
% of Total
in FY 15
% of Total
in FY 14 (R)
Ministry of Civil Aviation and Tourism 0.04 0.12
Ministry of Labour and Employment 0.05 0.13
Ministry of Cultural Affairs 0.09 0.08
Ministry of Information 0.12 0.13
Ministry of Textiles and Jute 0.13 0.12
Ministry of Religious Affairs 0.15 0.20
Ministry of Commerce 0.16 0.12
Ministry of Science and Technology 0.17 0.18
Ministry of Land 0.18 0.17
Ministry of Expatriates` Welfare &
Overseas Employment 0.20 0.16
Prime Minister’s Office 0.25 0.22
Ministry of Youth and Sports 0.31 0.29
Ministry of Shipping 0.40 0.46
Law and Justice Division 0.41 0.32
Information and Communication
Technology Division 0.47 0.50
Ministry of Environment and Forest 0.55 0.60
Posts and Telecommunications Division 0.55 0.59
Election Commission 0.59 0.48
Ministry of Public Administration 0.59 0.48
Ministry of Housing and Public Works 0.62 0.54
Ministries
% of Total
in FY 15
% of Total
in FY 14 (R)
Ministry of Primary and Mass Education 11.75 11.41
Local Government Division 11.23 11.29
Ministry of Agriculture 11.00 12.16
Ministry of Disaster Management and
Relief 8.42 8.01
Ministry of Food 8.25 7.82
Ministry of Education 8.24 8.42
Ministry of Health and Family Welfare 8.24 8.54
Power Division 5.36 6.02
Roads Division 3.15 2.80
Ministry of Water Resources 2.96 2.50
Ministry of Railways 2.59 2.58
Ministry of Women and Children
Affairs 2.14 2.31
Ministry of Social Welfare 1.99 1.63
Ministry of Home Affairs 1.82 1.89
Rural Development and Co-operatives
Division 1.76 1.85
Energy and Mineral Resources Division 1.30 1.09
Ministry of Liberation War Affairs 1.30 0.87
Ministry of Chittagong Hill Tracts
Affairs 0.93 0.80
Ministry of Industries 0.79 1.53
Ministry of Fisheries and Livestock 0.73 0.60
Bottom 20 ministries according to the share of total allocation in FY 15Top 20 ministries according to the share of total allocation in FY 15
*According to gender budget total allocation in FY 15 and revised FY 14 allocations are Tk. 66,739 crore and 59,756 crore
respectively but according to our summation the values are Tk. 58510 crore and Tk. 53689 crore respectively

d. CHILD
 The number of projects under ADP which concerns the development of children in
Bangladesh has been reduced substantially in FY15
 In FY15 the number of ADP projects related to child development stands at
21compared to 55 in ADP of FY14
 The allocation for children has also declined
 Child related allocation in ADP of FY15 is 1.94% of total budget and 0.36% of GDP
 The corresponding figures for previous fiscal year were 3.73% of total budget
and 0.70% of GDP

e. SOCIAL SAFETY NET PROGRAMMES
 Allowances under social safety net programmes (SSNP) remain unchanged since FY
2010.As a result the real value of allowance reduced over the years
 Thus the real value of Tk. 300 would be Tk. 221 if price level of April 2014 is
compared with price level of July 2010 (CPI in July 2010 and April 2014 was
147.19 and 198.93 respectively)
 Honorarium for freedom fighters has been increased from Tk. 2000 in FY2014 to
Tk. 5000 in FY 2015.
 This is a positive move as many freedom fighters live in abject poverty without
having any source of income.
 A special allocation of Tk. 50 crore has been proposed for construction of houses in
divisional and district towns for neglected segment of the society
 This is a positive initiative. However, this proposal should be translated into
implementation.

LOCAL GOVERNMENT
Allocation for LGD in theTotal Budget (FY2011-12 to FY2014-15)
FiscalYear Budget for Local
Government (Crore
Taka)
Revised Budget for Local
Government (CroreTaka)
Actual budget for local
government (Crore
Taka)
2011-12 10,909
(6.67)
10,393
(6.45)
9,442
(6.19)
2012-13 12,433
(6.48)
13,220
(6.98)
12,314
(7.08)
2013-14 12,961
(5.83)
13,322
(6.16)
6177.6
(Upto March, 2014)
2014-15 15,464
(6.17)
 Allocation for local government division as a percentage of total budget is 6.17
per cent which is almost similar (6.16 per cent) compared to the last years’
(2013-14) revised budget. Also, Growth rate is about 16.08 per cent over
2013-14 revised budget.

LOCAL GOVERNMENT
 As is usually the case, budget speech contains several promises for
improvements, but does not refer to any specific area of policy intervention
 Allocation for LGD in ADP remains stagnant, with the share coming down
from 19.0 per cent (revised 2013-14) to 16.8 per cent of ADP
 The speech stated about vesting more power and authority to the rural
local government institutions but nothing is said about the urban local
government institutions.
 Creation of specialized bureaucracy may lead to incurring unnecessary
revenue expenditures; it is unlikely to contribute to development of local
government and will not ease the dependency of local government on
central government
 Elected representatives’ capacity development programmes need to have
more allocation.

DISTRICT BUDGET
(As Percentage of Total District Budget)
FY 2013-14 FY 2014-15
Tangail Tangail Khulna Chittagong Barisal Rajshahi Rangpur Sylhet
Total
Development
33.16 40.53 59.87 45.83 36.97 27.68 36.10 40.14
Total Non-
development
66.84 59.47 40.13 55.13 63.03 72.32 63.90 59.86
Sector-wise Allocation RANKING
(WEIGHTED
AVERAGE)
Top 1 Education
(17.06%)
Roads
(13.04%)
Railway
(20.19%)
Local
Government
(18.55%)
Education
(15.33%)
Education
(28.53%)
Education
(14.98%)
Local
Government
(11.75%)
Education
26
Top 2 Primary and
Mass Education
(11.40%)
Education
(12.18%)
Education
(10.57%)
Railways
(14.18%)
Local
Government
(12.91%)
Home (9.89%) Local
Government
(13.11%)
Home
(11.67%)
Local Government
25
Top 3 Disaster
Management
and Relief
(8.76%)
Primary and
Mass
Education
(11.54%)
Local
Government
(9.33%)
Education
(11.05%)
Primary and
Mass
Education
(11.70%)
Primary and
Mass
Education
(8.49%)
Health and
Family
Welfare
(9.45%)
Primary and
Mass
Education
(11.37%)
Primary and Mass
Education
16
Top 4 Local
Government
(8.71%)
Local
Government
(9.72%)
Home (9.21%) Primary and
Mass
Education
(7.92)
Home
(11.53%)
Local
Government
(8.24%)
Primary and
Mass
Education
(8.94%)
Health and
Family
Welfare
(9.07%)
Home
13
Top 5 Health and
Family Welfare
(8.32%)
Food
(7.59%)
Water
Resources
(8.77%)
Home
(7.10%)
Health and
Family
Welfare
(9.20%)
Health and
Family
Welfare
(8.13%)
Food (7.92%) Railways
(6.79%)
Railways
10

DISTRICT BUDGET
Allocated
amount for 7
districts
(in crore taka)
Estimated
budget for 64
districts
(in crore taka)
Estimated budget for
64 districts as a % of
National Budget 2014-
15
(in crore taka)
Total District Budget 19,596.00 1,79,163.40 71.52
Development Budget 7703.82
(39.31%)
70434.92
(39.31%)
81.57
Non-development
Budget
9937.87
(50.71%)
90860.52
(50.71%)
70.86
 Share of non development budget (50.71%) for these 7 districts are in harmony with the
national non-development budget (51.19%).
 Share of development budget (39.31%) is a little higher than that of the national budget
(34.47%).
 If the current budget proposed for all 64 districts, it would have taken about 70% of the
total budget leaving about 30 % for the national budget which would have not been
sustainable.

 It may be recalled here that CPD, in its State of the Economy report released on
June 4, 2012, has argued in favor of undertaking rigorous institutional reforms and
policy measures to enable Bangladesh to graduate to the next phase of
development. Later on, the budget speech 2012-13 recognized the need for
undertaking second generation reforms and consequently a dedicated section was
placed on reforms. This was one of the novelties of Budget FY2012-13. This is
definitely a positive move which has been continued over two successive years i.e.
FY2014 and FY2015.
 CPD in its Proposals for the National Budget FY2015 released on May 4, 2014
stated that macroeconomic performance and budget implementation will critically
hinge on non-economic dimensions of institutional and policy environment in the
country : (i) implementation capacity of the state; (ii) oversight capacity; (iii) capacity
for reforms.
 In line with the earlier two budgets, FY2015 budget has presented a list of policy
reforms and programmes under three broad heads: (i) Implemented Policies and
programmes ; (ii) Ongoing priority programmes; (iii) Programmes yet to be
completed.

Implementation capacity
(Human resource management,
devolution of power and
autonomy and data/information
availability and monitoring)
Oversight capacity
(Rule of law, democracy and
representativeness and control of
corruption and leakages)
Capacity for reforms
(Regulatory reforms,
administrative reforms and
legal and institutional
reforms)
Implemente
d Policies
 A state of the art debt database
installed to enhance the capacity of
public debt management
 The total accounting and human
resource management systems of
Bangladesh Bank brought under
Enterprise Resource Planning (ERP)
software
 Money Laundering Prevention Act,
2012 enacted.
 The Exchanges (Demutualization)
Act, 2012 passed in the parliament.
 List of large foreign aided projects
prepared, monitoring activities
taken and an index of external
resource mobilization prepared.
 VAT and Excise Duty Act, 2012
enacted
 Provision for tax rebate on
corporate social responsibility
spending introduced
 The Customs Act, 1969
amended
 Facility for refinancing SME
sector through four funds
continued
Selected Policies/Programmes in FY2015 Budget according to the three
categories identified by the CPD

(Human resource management,
devolution of power and
autonomy and data/information
availability and monitoring)
Oversight capacity
representativeness and control of
corruption and leakages)
administrative reforms and
legal and institutional
reforms)
Ongoing
priority
programmes
 Ensuring appropriate utilization of
project aid
 Operationalization of PPP
 Public Service Act 2013
 Controlling unethical financial
practices
 Preparing Financial Reporting Act
and establishing Financial reporting
Council
 Formulating Audit Act for
budget implementation
 Formulation of Public Servants
Act. 2013
 Digitization of the Land
Registration

(Human resource
management, devolution of
power and autonomy and
data/information availability
and monitoring)
Oversight capacity
representativeness and
control of corruption and
leakages)
administrative reforms
and legal and institutional
reforms)
Priorities
Programm
es yet to
be
Complete
d
 Establishing the ICT Capacity
Development Company/
 Establishing Tax Information
Management and Research
Centre
 Setting upTrade Portal by 2012
 Establishing separate clearing
and Settlement Company for
settling the transactions in the
Stock Exchange
 Establishing the National Tax
Tribunal
 Simplification of
investment related laws
 Establishing Reserve for
Reward and Financial
Incentives Fund

A Review of Economic Reforms
 Efficacy of Implemented Reforms: It is good that Money Laundering Act, 2012 has been
enacted. However, anecdotal information and global database indicate that a significant
amount (about $1.5 billion annually) is being siphoned off through offshore accounts,
second homes, trade mispricing in the form of over and under invoicing and other
forms of capital flight. A law was framed earlier to set up a Transfer Pricing Cell (TPC)
to address capital flight. On a positive note, FY2015 Budget states that the recently set
up Transfer Pricing Cell will start functioning from 1st July 2014.
 Scaling Up: Some initiatives such as performance audit has been undertaken on pilot
basis. But the unfinished agenda is to scale this up on a universal basis.
 Preparatory Work : With regard to operationalizing New VAT Law, concerns remain
whether the needed preparatory works (re-designing the VAT administration
processes, acquiring and configuring a new computer system, recruiting and training
new staff etc.) will be completed before the law comes into effect in 2015. Even
though some key preparatory tasks including procurement of new information
technology systems and services were supposed to be completed by the end of 2013,
much of the work remain behind planned schedule.

Many Important Measures are stalling
 In 2013-2014 budgets, 27 programmes were mentioned as ‘programs yet to be completed’.
In 2014-2015 budget, the number has remained the same i.e. 27, with 25 initiatives/reforms
carried over from the previous year.
 Public Servant Act 2013 is not making any headway for the last couple of years. As per
budget 2014, ‘Formulation of Public Servant Act was ‘awaiting approval of the Cabinet
Committee’ while in Budget 2015 its status was mentioned as ‘under process’. This is an
agenda that demands highest priority.
 As per budget FY2015, formulation of ‘Audit Act for Budget Implementation’ is underway
while the status was the same in budget FY2014 indicating lack of positive movement.
 Many important reforms are stalling over the years. For example, in FY2013 budget it was
mentioned that draft ‘Financial Reporting Act’ was in place. FY2014 and FY2015 budgets
state ‘work in progress’.
 Although in his FY2009 budget speech, the Finance Minister talked of continuing with
Regulatory Reforms Commission’s work, this was not followed up. Time has come to set
up a Task Force to address pending reform measures.
 96 ongoing priority programmes mentioned in Budget FY2013 list are included in the list
of 265 ongoing programmes mentioned in FY2015 Budget.

Missing Agendas
 Capacity Building of IMED has emerged as a key factor particularly in view of
implementation of major infrastructural projects in recent times.
 Strengthening of local government institutions is needed to involve these closely
with the task of monitoring and implementations of projects within their
jurisdiction.
 Time has come to put in place the following initiatives towards better
Macroeconomic Management:
 Set up an Independent Statistical Commission to validate the
Macroeconomic correlates
 Set up Agriculture Price Commission
 Set up Local Government Financing Commission
 Constitute Public Expenditure Review Commission

IX. CONCLUDING REMARKS
Our four levels of analyses lead us to the following conclusions:
 Macroeconomic correlates are pretty inconsistent and lack due diligence in
their estimation
 Key fiscal targets do not reflect reality and lack rigour in designing of the
framework
 Fiscal measures are largely in order and tuned to budgetary objectives
 The budget has not provided for necessary institutional reforms towards
improved fiscal-budgetary management as well as supportive policy
environment

THANKYOU

An analysis of the Bangladesh's National Budget for FY2015

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An analysis of the Bangladesh's National Budget for FY2015